Final Results
Banco Comercial Portugues S.A.
21 January 2003
FOR IMMEDIATE RELEASE JANUARY 21, 2003
BANCO COMERCIAL PORTUGUES ('BCP')
EARNINGS RELEASE FOR 2002
* Consolidated Net Income of Euro 472.7 million in 2002, before
extraordinary charge for general banking risks;
* Net interest margin maintained at 2.6%, reflecting an improvement to the
structure of customers' funds and loans;
* Banking commissions up by 12.3%, excluding markets;
* Mortgage loans up by 19.5%. Strong increase in BCP's market share in new
mortgage loans in the fourth quarter of 2002 (estimated at 24.5%);
* Credit quality improves, with past due loans accounting for 1.5% of total
loans at December 31, 2002, compared to 1.7% at the end of 2001, while coverage
by provisions exceeds 142%. New past due loans decrease by 2.0%;
* Regulatory capital rises by 17.0%, reflecting the issuance of Euro 700
million in mandatorily convertible securities ('Capital BCP 2005') and of Euro
375 million in perpetual debt, more than compensating for provision charges for
unrealised losses, the write-off of BCP's investment in ONI, SGPS, and increased
pension fund contributions;
* An extraordinary provision for general banking risks amounting to Euro
200 million was charged in order to strengthen the Bank's financial structure;
* Tier One capital of 6.6%.
Banco Comercial Portugues (BCP, NYSE: BPC, BCPPRA) today reported consolidated
net income of Euro 472.7 million in 2002, before an extraordinary provision
charge for general banking risks, down 17.3% from 2001. Return on equity stood
at 23.8%, with return on assets standing at 0.8%, before the extraordinary
provisioning charges.
PROFITABILITY INDICATORS 2002 2001 Change
(Millions of euros, except percentages) 2002/2001
Net income before extraordinary provisions for
general banking risks 472.72 571.67 -17.3%
Cash-flow 1,147.9 1,182.6 -2.9%
ROE
(before extraordinary provisions for general
banking risks) 23.8% 26.2% -
ROA
(before extraordinary provisions for general
banking risks) 0.8% 0.9% -
ROA before minority interests
(before extraordinary provisions for general
banking risks) 0.9% 1.1% -
Given the unfavourable economic background to the BCP Group's activities in
2002, and in particular the significant devaluation of the investment portfolios
of the Group's banks, insurance companies and pension fund, BCP has implemented
a series of measures aimed at reinforcing the Group's capital and at achieving
superior levels of capitalisation over the medium term. The following
initiatives deserve special mention:
- An agreement with Association Achmea for the change of the joint
control of Eureko B.V.. This agreement will allow BCP to regain the full control
of Seguros e Pensoes, mitigating the risks related to the Group's investments in
insurance activities and allowing for greater flexibility in the strategic
management of this asset;
- The Issuance of securities, mandatorily convertible in ordinary shares,
named 'Capital BCP 2005'. This issue's success was remarkable, with demand
exceeding supply by more than 10%, resulting in the strengthening of core tier
one capital by Euro 700 million. In addition, regulatory capital was also
reinforced through the issue of Euro 375 million in perpetual debt;
The proposal for the appropriation of profits, to be presented to the General
Meeting of Shareholders, includes the distribution of Euro 232.7 million as
dividends, corresponding to a Euro 0.10 dividend per share. A Euro 200 million
provision for general banking risks was charged to extraordinary costs in 2002
before the appropriation of profits required for legal reserves and for bonuses
to employees. This provision, which is not compulsory according to applicable
regulations, will contribute to the significant strengthening of the Bank's
capacity to preserve its capital, a relevant step, given the current domestic
economic framework and developments in the international geo-political context.
After charging this provision, net income for the BCP Group amounted to Euro
272.7 million.
Regarding this provision, Mr. Jorge Jardim Goncalves, Chairman and CEO of BCP,
commented: 'The decision to charge this provision took into account the
prevailing uncertainty in capital markets and current estimates for the domestic
economic activity in 2003, leading to a conservative stance and further caution
with regards to provisions for general banking risks.' Mr. Jorge Jardim
Goncalves added: 'This decision is intended to reinforce the Bank's financial
strength and to generate the conditions for its sustained development.'
BCP's consolidated financial statements for 2002 include non-recurring capital
gains, booked during the first half of 2002 under the process of rationalisation
of real-estate assets and in order to optimise capital allocation. These
transactions compensated for the impact that decreasing returns on financial
investments had on the pension fund assets. Capital gains totalled approximately
the same amount as additional pension fund, market and credit risk provisions
(Euro 85 million) with the result that the impact from these non-recurring
transactions on consolidated net income was negligible.
The Bank's increased shareholding in NovaBank and the fact that BCP became the
majority shareholder of Banco Internacional de Mocambique after having merged it
with Banco Comercial de Mocambique, led to both these institutions being fully
consolidated as from the end of 2001. As these interests were previously
consolidated using the proportional method, we have produced pro forma financial
statements for 2001, allowing a comparable basis with the figures now presented.
Net interest income decreased 2.9% to Euro 1,327 million in 2002 from pro forma
Euro 1,366 million in 2001. The measures the Bank has implemented in 2002 aimed
at the protection of interest spreads (namely a pricing revision of funding
products for small and medium sized companies and the reduction of interest paid
on demand deposits at the Group's retail networks, as well as the quick
adjustment of pricing schedules to changes in money markets) resulted in the
maintenance of the net interest margin at 2.6%, the same level as seen in 2001.
This effect was more than offset by decreasing average interest earning assets
stemming from credit securitisation totalling Euro 467 million in 2002.
Provisions for credit risks amounted to Euro 316 million in 2002, increasing
significantly from Euro 211 million in 2001 on a comparable basis. This growth
was attributable to a very prudent provisioning policy, adapted to the current
phase of the economic cycle, which took into account both applicable legislation
and the appraisal of underlying risks, as well as the application of Regulation
7/2000 of the Bank of Portugal, under which full provisioning was required for
loans overdue by more than 18 months collaterised by personal guarantees,
instead of the three years previously applicable.
Income from securities stood at Euro 140 million in 2002 (Euro 142 million in
2001, on a comparable basis). This decrease was caused by a lower contribution
from some equity accounted associates, as well as by lower dividends received.
Nonetheless, the increased contribution from Bank Millennium (formerly named Big
Bank Gdanski) stood out, in spite of a decrease in income in the fourth quarter
of 2002.
Net commissions rose 1.4% to Euro 499 million in 2002 from Euro 492 million in
2001, on a comparable basis. This performance was mainly attributable to
increased fees on debit and credit cards and on credit operations, and more than
compensated for lower commissions from securities and asset management
activities resulting from the continuing instability in capital markets,
particularly equities, and the subsequent channelling of customers' savings
towards lower risk instruments.
Net trading gains decreased Euro 70.4 million from 2001, reflecting lower
foreign exchange and securities trading results. This resulted from the physical
introduction of the euro and the poor performance of capital markets.
Other net operating income was influenced by a capital gain of Euro 85 million
on the sale of premises to the Bank's pension fund, following the Group's
strategy to rationalise real-estate assigned to operations and to optimise
capital allocation. Excluding this impact, other net operating income increased
11.4% on a comparable basis to Euro 313 million in 2002 from Euro 281 million in
2001. This performance reflects higher recoveries of overdue loans and interest
and growing income from advisory and other services to customers.
OTHER INCOME 2002 2001 2001 Change
(Millions of euros) Pro forma 2002/2001
Pro forma
Net Commissions 499.2 492.2 487.3 1.4%
Of which: domestic activity 450.2 449.9 449.9 0.1%
Trading Gains 96.8 167.2 156.4 -42.1%
Of which: domestic activity 79.4 144.3 144.3 -45.0%
Other Net Operating Income (1) 313.4 280.6 281.4 11.7%
Of which: domestic activity 289.1 263.6 263.6 9.7%
Other Income /Total Income (1)
- Total 44.2% 44.8% 44.7% -
- Domestic activity 44.6% 45.4% 45.4% -
(1) Excludes non-recurring transactions.
Operating costs (staff costs, other administrative expenses and depreciation)
relating to BCP's domestic activities were favourably influenced by continuing
rationalisation (which started to be implemented following the acquisitions that
took place in 2000), which resulted in a decrease in the BCP Group's headcount
and number of branches from the end of 2001. However, the impact of domestic
rationalisation was more than offset by increased pension funds charges, from
Euro 67 million in 2001 to Euro 100 million in 2002. Excluding this effect,
domestic operating costs for 2002 were roughly in line with 2001, totalling Euro
1,149 million (Euro 1,146 million in 2001, on a pro forma basis).
The impact of higher pension fund charges and of the Group's international
operations, some of which are undergoing major recruiting efforts, notably in
Greece and the US, was particularly clear in the increase in staff costs, up to
Euro 784 million in 2002 from Euro 741 million in 2001. Excluding these effects,
staff costs decreased by 0.2%, reflecting continued downsizing.
Other administrative expenses, which rose to Euro 529 million in 2002 from Euro
524 million (pro forma) in 2001, were also affected by Group's activity abroad,
as domestic other administrative expenses decreased 0.5% from 2001. Domestic
depreciation totalled Euro 132 million in 2002 (Euro 126 million in 2001, on pro
forma terms), with the higher growth in depreciation related to business outside
of Portugal being explained by the expansion of the branch network of some of
the Group's subsidiaries, notably Greece's NovaBank.
The increase in other provisions, to Euro 59 million in 2002 from Euro 12
million in 2001, resulted from the need to provide unrealised losses on
securities, caused by falling market prices, and from charging non-recurring
provisions in the second quarter.
OPERATING COSTS 2002 2001 2001 Change
(Millions of euros) Pro forma 2002/2001
Pro forma
Staff Costs 784.5 741.0 727.4 5.9%
Of which: domestic activity 674.8 643.0 643.0 4.9%
Other Administrative Expenses 529.3 524.2 509.0 1.0%
Of which: domestic activity 441.3 443.6 443.6 -0.5%
Depreciation 174.0 154.4 147.9 12.7%
Of which: domestic activity 131.8 126.1 126.1 4.6%
Operating Costs 1,487.8 1,419.6 1,384.3 4.8%
Of which: domestic activity 1,247.9 1,212.7 1,212.7 2.9%
Operating Costs/ Total Income (1)
- Total 62.6% 57.3% 56.6% -
- Domestic activity 58.1% 53.6% 53.6% -
(1) Excludes non-recurring transactions.
Loans to customers amounted to Euro 45,451 million in 2002, up 5.9% from Euro
42,938 million in 2001. Excluding the impact of the securitisation of Euro 467
million in consumer loans, loans to customers increased by 7.0%. The growth of
loans to individuals, in particular mortgage loans, up by 19.5%, strongly
contributed to this performance. Loans to companies rose slightly (0.8%).
Performance here was influenced by continued efforts to optimise the risks
resulting from the acquisitions in 2000, by companies' decisions to postpone
investments due to the persistent sluggish economic conditions and by debt
reduction initiatives implemented by some heavily-leveraged companies.
Total customers' funds stood at Euro 47,491 million at December 31, 2002, down
3.2% from Euro 49,068 million at the same date of 2001. The performance of total
customers' funds was influenced by the success of the 'Capital BCP 2005'
mandatorily convertible issue, totalling Euro 700 million, which caused a
reallocation of savings from other instruments, namely deposits and investment
funds. The latter were also affected by the increased risk aversion resulting
from continuing unstable financial markets and from worsening economic
conditions. This, together with a postponement of the prospects for recovery,
contributed to a higher appetite for fixed income products. Nonetheless,
capitalisation insurance and securities displayed strong growth (12.5% and
10.1%, respectively), reflecting the Group's effectiveness in bancassurance and
successful placement of securities by the Group's commercial networks, supported
by the new retail networks organisational model.
ACTIVITY 2002 2001 Change
INDICATORS 2002/2001
(Millions of euros)
Total Assets 61,852 62,961 -1.8%
Loans to Customers 45,451 42,938 5.9%
Total Customers' Funds
- Deposits 27,098 29,451 -8.0%
- Assets under Management 9,230 9,601 -3.9%
- Capitalisation Insurance 6,451 5,735 12.5%
- Securities 4,713 4,282 10.1%
- Total 47,491 49,068 -3.2%
Own Funds (1) 6,530 6,294 3.7%
(1) Shareholders' Equity, Preference Shares and Subordinated Debt.
Loan quality improved from the end of 2001, as past due loans accounted for 1.5%
of total loans at December 31, 2002, compared to 1.7% a year earlier. Coverage
by provisions of total past due loans, at 142.2% at year-end 2002 (146.3% at
December 31, 2001), continued to be high, having improved from the end of both
the second and the third quarters of 2002.
LOAN QUALITY INDICATORS 2002 2001
Total overdue loans/Total loans 1.5% 1.7%
Provisions/Total overdue loans 142.2% 146.3%
Solvency indicators stood at satisfactory levels at the end of 2002. According
to the Bank of Portugal criteria, the solvency ratio was 9.8%, with a ratio of
10.8% in accordance with BIS principles. Tier One stood at 6.6%. Regulatory
capital was strengthened at the end of 2002 through the 'Capital BCP 2005'
mandatorily convertible securities issue, eligible as tier one capital. BCP has
also issued Euro 375 million in perpetual debt in 2002, thus strengthening tier
two capital.
The issue and sale of the 'Capital BCP 2005' securities, mandatorily convertible
into BCP ordinary shares totalling Euro 700 million and maturing in December 30,
2005, was successfully concluded in December 2002. The conversion price was set
at Euro 2.449 per share, corresponding to the award of 2.0416 BCP shares for
each 'Capital BCP 2005' security at the date of conversion. This issue, which
pays an attractive 9% gross interest per annum, was the first of its kind in
Portugal, and a noteworthy success, with total demand significantly exceeding
the amount on offer. The performance of the Group's commercial networks and
other supporting departments in marketing the offer was paramount, and 40% of
the issued amount was placed with non-shareholders of BCP.
This issue strongly contributed to the financial strengthening of the Group,
aiming at achieving capitalisation levels that compare more favourably with
international practices, and also allowing for the rationalisation and
consolidation of the Group's activity and for the realignment of strategic
alliances, with a view to focusing on the Group's core businesses.
The change in actuarial and financial differences on BCP's pension fund, as a
result of unstable capital markets, that led to significant price depreciation,
and the amount related to early retirements taking place in 2002 totalled Euro
350 million. In addition, provisions for potential capital losses totalling Euro
163 million were charged in accordance with Regulation 4/2002 of the Bank of
Portugal, including those related to the investment in ONI, following the
agreement for the non-launch of a fourth mobile operator in the Portuguese
market, had a negative impact of Euro 513 million in consolidated regulatory
capital. However, this effect was more than compensated for by the favourable
impacts of the 'Capital BCP 2005' and perpetual debt issues, resulting in total
regulatory capital of Euro 5,374 million at the end of 2002, according to BIS
principles (Euro 4,592 million at December 31, 2001).
REGULATORY CAPITAL (BIS) 2002 2001 Change
(Millions of euros) 2002/2001
Tier One Capital
- 'Core' 2,072 1,929 7.4%
- Preference Shares 1,198 1,224 -2.1%
- Total 3,270 3,153 3.7%
Tier Two Capital
- Debt 2,880 2,550 12.9%
- Deductions (776) (1,111) -30.1%
- Total 2,104 1,439 46.2%
Total Regulatory Capital 5,374 4,592 17.0%
Risk Weighted Assets 49,885 48,857 2.1%
Ratios
- Tier One 6.6% 6.5%
- Tier Two 4.2% 2.9%
- Total 10.8% 9.4%
BCP's share price depreciated by 49.9% in 2002, strongly influenced by the
worldwide impact on those institutions with significant exposures to the
insurance sector. In spite of the instability and uncertainty prevailing in
financial markets, the market share of BCP's equity in terms of volumes traded
on Euronext Lisbon was strengthened from 11.6% in 2001 to 13.8% in 2002 as a
consequence of dynamic trading, with total turnover amounting to Euro 3.0
million in 2002. BCP also increased its weight in the PSI-20 index from 14.6% at
year-end 2001 to 17.5% after the index's reweighing at the beginning of this
year, reflecting its growing importance in the domestic share market.
The Senior Board has approved a proposal regarding a change to the Bank's
articles of association, to be submitted to the General Meeting of Shareholders,
relating to the creation on an Audit Committee. This new committee will be
headed by the Chairman of the Board of Auditors, and will be comprised of two
additional members with relevant experience, to be appointed by the Senior Board
amongst its members. Regardless of the tasks already held by the Board of
Auditors, the Audit Committee will be responsible for permanently monitoring the
activity of the Bank's external auditors, assessing internal procedures related
to the receipt and treatment of complaints and concerns regarding accounting
matters, including those submitted by employees, and proposing measures and
corrections it deems relevant to the Board of Directors, including the
engagement of independent counsel and other advisors.
Concluding, Mr. Jardim Goncalves commented: 'We have taken important steps in
2002 in order to preserve and strengthen the Group's capitalisation, such as the
strategic realignment of our investment in Eureko, which resulted in the
reacquisition of Seguros e Pensoes' total share capital, the issue of 'Capital
BCP 2005' convertible securities and of perpetual debt, amounting to Euro 700
million and to Euro 375 million, respectively, and the sale of several
real-estate assets and shareholdings, including Grupo Financiero Bital in
Mexico, Spain's Activo Bank and Brisa. Some benefits arising from these measures
are likely to be seen in 2003, both in terms of strategic focus and of improved
operational profitability in certain areas'.
Commenting on the current year, he added: 'The success of our activity in 2003
will be heavily influenced by the domestic and international economic
developments, as well as by the performance of financial markets. We will
continually analyse, as we always have done, the options available to us, in
order to raise the means required to pursue the safe and sustained consolidation
and development of the Bank, creating the conditions for improving profitability
and creating shareholder value.'
January 21, 2003
- End of announcement -
For further information:
Miguel Duarte Banco Comercial Portugues Tel: +35 121 321 1081
Toby Moore/Catriona Cockburn Citigate Dewe Rogerson Tel: +44 20 7638 9571
BANCO COMERCIAL PORTUGUES
Consolidated Balance Sheet as at 31 December, 2002 and 2001
2002 2001
(Thousands of Euros)
Assets
Cash and deposits at central banks 1,286,008 1,821,968
Loans and advances to credit institutions
Repayable on demand 860,306 1,380,102
Other loans and advances 3,209,082 4,250,907
Loans and advances to customers 45,450,693 42,938,314
Securities 3,560,910 4,773,792
Treasury stock 156 8,986
Investments 2,562,845 2,675,506
Intangible assets 153,151 135,251
Tangible assets 1,132,094 1,311,444
Other debtors 1,020,071 1,285,956
Prepayments and accrued income 2,616,257 2,378,482
61,851,573 62,960,708
Liabilities
Amounts owed to credit institutions
Repayable on demand 400,244 403,676
With agreed maturity date 12,740,586 12,765,519
Amounts owed to customers
Repayable on demand 12,308,285 12,713,301
With agreed maturity date 14,779,759 16,727,749
Debt securities 11,534,820 10,718,889
Other liabilities 528,285 806,609
Accruals and deferred income 1,877,319 1,482,793
Provision for liabilities and charges 994,724 924,182
Subordinated debt 3,143,860 2,883,598
Total Liabilities 58,307,882 59,426,316
Shareholders' Equity
Share capital 2,326,715 2,326,715
Mandatorly convertible notes 528,207 -
Share premium 715,117 715,203
Reserves and retained earnings (1,381,618) (854,742)
Total Shareholders' Equity 2,188,421 2,187,176
Minority interests 157,071 123,491
Minority interests in preference shares 1,198,199 1,223,725
Total Minority Interests 1,355,270 1,347,216
61,851,573 62,960,708
BANCO COMERCIAL PORTUGUES
Consolidated Statement of Income
for the years ended 31 December, 2002 and 2001
2002 2001
(Thousands of Euros)
Interest income 2,988,451 3,396,524
Interest expense 1,661,703 2,044,666
Net interest income 1,326,748 1,351,858
Provision for loan losses 316,280 208,478
Net interest income after
provision for loan losses 1,010,468 1,143,380
Other operating income
Income from securities 139,963 140,007
Net commissions 499,172 487,296
Net income arising from trading activity 96,837 156,369
Other income 478,766 351,026
1,214,738 1,134,698
Other operating expenses
Staff costs 784,496 727,358
Other administrative costs 529,251 509,034
Depreciation 174,024 147,891
Other provisions 58,738 11,781
Other expenses 79,859 69,620
1,626,368 1,465,684
Income before income taxes 598,838 812,394
Income taxes 55,379 84,455
Net income 543,459 727,939
Minority interests 70,738 90,265
Net income 472,721 637,674
Extraordinary costs:
Provision for general banking risks 200,000 -
Restructuring costs - 66,002
Net income for the year 272,721 571,672
This information is provided by RNS
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